While I'm not happy about Fred's release at all and may never fully forgive DW, it may have gone down like this...
The BIlls sign Shady. With so much money tied up there, and other good cheap backs on the roster, Whaley decides to talk to Fred about him not making the roster.
The Pegulas nix the cut when Whaley informs them. Whaley, based on what he now heard from the Pegulas, tells Fred he's going to stay a Bills after all.
Whaley realizes that resigning Dareous (and others) is going to be difficult/impossible without some serious penny-pinching. He revisits the idea of cutting Fred with the Pegulas. This time he persuades them.
From Fred's point of view, Whaley is a liar. But DW may have never actually intentionally lied to Fred.
P.S. Today I'll be watching the game with the Bills Backers of Seattle wearing my #22 jersey.